What is ETH gas and how do fees work in Ethereum?

Gas in Ethereum is the unit for measuring the computational effort required to execute a transaction. More complex transactions consume more gas, and therefore incur higher fees.

Table of Contents

  1. Ethereum fees at a glance
  2. Ethereum fees in detail
  3. Customizing fees when sending ETH and ERC-20 tokens

Ethereum fees at a glance

Making transactions on the Ethereum network incurs fees that are paid to the network in ETH, the network’s native token. This means that you must have a balance of ETH in your wallet in order to execute any type of transaction on the Ethereum network.

Ethereum fees in detail

The cost you pay for a transaction on the Ethereum network is two-fold (as of EIP-1559, Ethereum's transaction fee overhaul which came into effect in August 2021). First, there is the base fee, which is burned (destroyed). Second is the inclusion fee, or tip, which is paid to network validators. Both of these fees are influenced by market forces, meaning the cost goes up when the network is congested. The total cost for a transaction also depends on its complexity.

Transaction complexity is measured by computational effort, which is delineated in units of "gas." For example, sending ETH from one wallet to another (one of the simplest transactions you can make), may consume up to 21,000 units of gas. One unit of gas is equal to 0.000000001 ETH (10-9 ETH). Note that this denomination of ETH is also known as a giga-wei, or gwei.

Total fees are calculated as follows:

$Gas units * (base fee + tip)$

Let’s look at an example where Alice sends Bob 1 ETH. Imagine the base fee is 100 gwei and Alice includes a tip of 10 gwei. Using the above formula, we can calculate this as $21,000 * (100 + 10) = 2,310,000 gwei$ or 0.00231 ETH.

When Alice sends the money, 1.00231 ETH will be deducted from Alice's account. Bob will be credited 1.0000 ETH. The validator will receive the tip of 0.00021 ETH and the base fee of 0.0021 ETH is burned

Customizing fees when sending ETH and ERC-20 tokens

The best digital wallets allow you to customize your fees when creating transactions on the Ethereum network. For example, here's how it works in the Bitcoin.com Wallet:

  1. On the "Enter send amount" screen, tap on the "Network fee" icon at the top-left
  2. Choose from one of the three following options:

'Eco' means you'll pay a lower fee, but your transaction will take longer

'Fast' strikes the optimal balance between cost and speed

'Fastest' optimizes for speed over cost

The Bitcoin.com Wallet constantly monitors the market rate for gas to arrive at the optimal gas price for each preset mode, but you also have the option to manually customize your gas price for each transaction. Note that gas prices fluctuate based on Ethereum network congestion, so whether your transaction is picked up by validators sooner rather than later depends on the gas price your set compared to the current market rate for gas. You can check gas rates using a tool like Eth Gas Station and set customized fees based on the market rate for gas. Here's how to set customized fees in the wallet:

  1. On the "Enter send amount" screen, tap on the "Network fee" icon at the bottom-left
  2. Select "Advanced fee options." You'll then be prompted to enter your precise desired gas price for your transaction.

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